NATIONAL BUSINESS AGENDA Sabit Bagirov Entrepreneurship Development Foundation

NATIONAL BUSINESS AGENDA

Sabit BagirovEntrepreneurshipDevelopment Foundation

23.02.2009 Sabit Bagirov2

Developing of private entrepreneurship in Azerbaijan

Private entrepreneurship has been developing in the country after it regained its independence in 1991. This was furthered by: the policy of switching from the soviet economic system to a

market economy; the programs related to this policy; the measures to adopt new laws; creating market institutions; macroeconomic stability; large-scale foreign investments in energy and other spheres of the

economy; privatization of small and medium-sized enterprises and land; other measures.



Today there are more than 60 thousand private companies in the country – small, medium-sized and large. Small enterprises account for 20% per cent. Moreover, entrepreneurial activity without setting up a legal entity is quite developed. There are more than 260 thousand such businessmen in the country today.

The share of the private sector in GDP is 84 per cent today (including the activity of foreign oil companies).

There are more than 10 large private companies in the country which have their own well-known brands.



In 2008 the government implemented a “one-stop-shop” principle for the registration of legal entities. The effectiveness of this decision is obvious. In the first six months, the number of registered enterprises increased by 30 per cent.

The same principle is used in Custom from January 1 2009.



The electronic system of tax payment has also been actively developing over the past year. According to the results of a sociological poll conducted among 1,000 small businesses in May-July, 34.4 per cent of are already using the electronic system of tax payment. Another 22.7 per cent intend to start using the electronic payment system in the near future.



Over the past year, a number of important amendments to the labor law have been adopted as well, the system of registering rights to own real estate has been developing and the situation surrounding the credit registry.



All these measures allowed Azerbaijan to become a leader by the number of reforms carried out in the country in the “Doing Business in 2009” report by the World Bank and the International Finance Corporation.



At the same time, the latest surveys, carried out by WB (Governance Indicators), EBRD, ADB, WEF, the Fraser Institute of Economics, the Heritage Foundation, the Transparency International and other internationally-recognized institutions and consultancy organizations, as well as national organizations such the Entrepreneurship Development Foundation, there are considerable reserves for the further development of the business climate in Azerbaijan.


National Business Agenda for 2009

The document was drawn up by the Entrepreneurship Development Foundation (EDF). The proposals were prepared within the framework of the Project “Improvement of the Business Climate in Azerbaijan”, financed by the Center for International Private Enterprise (CIPE, Washington, DC).

NBA can be find at: www.edf-syf.org


National Business Agenda for 2009

While preparing the proposals included in this document, EDF carried out a number of surveys, including: a survey among 1,000 representatives of small businesses; the deep interviews with business-leaders and some of

government bodies; analysis a number of laws and legal acts that regulate business; activity in Azerbaijan.

Moreover, EDF analyzed recommendations from world institutions and the experience of a number of transitional economies.


The survey among 1,000 representatives of small businesses. The geography of the survey.

Participants % Baku 500 50 Barda 32 3,2 Guba 41 4,1 Ganja 83 8,3 Khachmaz 42 4,2 Lankaran 34 3,4 Мingechevir 31 3,1 Shamakhi 31 3,1 Sheki 51 5,1 Shirvan 52 5,2 Sumqayit 83 8,3 Yevlakh 20 2,0

Total 1,000 100,0


The survey among 1,000 representatives of small businesses. Composition of respondents:

Legal entities - 61,6 %

Private individuals - 38,4 %


1. How do you assess the current economic situation for your business?

Quite favorable

4.5%

Favorable35%

Neither good, nor bad

37.2%

Unfavorable19.8%

Quite unfavorable

3.1%

Don't want to answer

0.4%


2. What are your plans regarding the recruitment of new employees in the next six months?

To reduce the number of employees

7.8%

To maintain the number of employees at

the same level62.7%

Don’t know/don’t

want to answer3.6%

To increase the number of

employees25.9%


3. Are you planning to expand your business in the same sphere or in any other sphere?

Yes, within six months14.4%

Yes, within a year

22.9%

No50.6%


want to answer7.4%

Yes, within three months

4.7%


4. How often are you visited by someone from government agencies

At least once a week4.8%

At least once a month39%At least once in

six months19.3%

At least once a year9.2%

They have not visited me yet

21.4%

Don’t know/don’t want

to answer6.3%


7. How do you assess the conditions for competition in the sector of the economy in which you work?


want to answer

7.3%

Fair63.5%

Unfair29.2%


19. Have you had to apply to the State Fund to Support Entrepreneurship for a loan?

Yes9%


to answer0.1%

I have never heard of such a

fund14%

No76.9%


23. How accessible a commercial loan in a bank?

Quite accessible (without any

bribes to employees of the

bank)24.6%

Quite accessible (after giving a

bribe, backhanders and

so on to employees of the

bank)26.1%

Not accessible enough25.4%

Inaccessible13.2%

Don’t know/don’t want to answer

10.7%


24. Do you think you are protected from officials’ arbitrariness?

Yes22.4%

To some extent40.1%


to answer1.8%

No35.7%


26. Do you use the opportunity to pay your taxes electronically?

Yes34.4%

Not yet, but I am going to

22.7%


to answer3.1%

No, there is no need for that

39.8%


39. Name the measures that the state needs to take in order to accelerate the development of private business in Azerbaijan (Choose no more than five answers)

643

531

509

396

376

315

272

31

0 100 200 300 400 500 600 700

To reduce tax payments

To improve the crediting of business

To protect business from groundless checks

To increase anti-monopoly control

To reduce corruption

To reduce social payments

To facilitate customs procedures

Don’t know

Number of respondents


41. In conclusion, assess the business climate in the country as a whole, not just with regard to your own business

Good16.9%

Satisfactory56.7%


to answer2%Unsatisfactory

24.4%


The survey among 1,000 representatives of small businesses

The full information about the survey among 1,000 representatives of small businesses can be find at:www.edf-syf.org


National Business Agenda for 2009.www.edf-syf.org

52 recommendations on 14 directions:

1. Institutional reform 2. The introduction of European definitions of small businesses 3. Regulatory reform 4. The improvement of the tax regime 5. Reform of the licensing system 6. Improvement of property registration system 7. The creation of an effective information system 8. Reform of the system of various approvals and construction permits9. The development of the infrastructure of small businesses 10. Tightening of punishment measures for non-accounting commercial activity 11. Streamlining of inspections 12. To ensure the supremacy of the law and fairness of the courts 13. Improvement of foreign trade procedures 14. Social corporate responsibility: from coercion to encouragement


NBA was presented to the president of Azerbaijan


World Economic Crisis and its challenges for Azerbaijan

The global economic crisis while had insignificant influence on a situation in Azerbaijan.

The basic reasons:1) Low level of integration in the global financial markets;

2) Structure of the goods of foreign trade;

3) Currency stocks of the country;

4) Insignificant external duty;


World Economic Crisis and its challenges for Azerbaijan

The following tendencies are observed:

Decrease of the budget incomes; Decrease of the Oil Fund incomes; Decrease of the FDI; Decrease of state and local private companies investment; Decrease of volume of currency transfers from the citizens of Azerbaijan

working abroad; Decrease of volumes of export non-oil goods; Decrease of volumes of consumers crediting; Insignificant devaluation of national currency; Decrease of the domestic production on a number of the enterprises. As a

consequence - dismissal of the workers and sending them in long no-charge vacation;

others


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NATIONAL BUSINESS AGENDA Sabit Bagirov Entrepreneurship Development Foundation